According to a two-page document obtained by Bloomberg, when General Motors Co. approached banks last May to seek proposals to manage its initial public offering, it also asked for help in selling Cadillacs and Corvettes.
CEO Ed Whitacre asked banks to consider using a portion of the underwriting fees to subsidize the purchase of GM cars by their employees.
Whitacre sought to take advantage of banks and get concessions while banks elbowed each other out to be able to participate in what very well could be the second-biggest IPO in US history.
Last June, JPMorgan Chase & Co. and Morgan Stanley won the lead mandate and they agreed to fees of 0.75% of the sale. People who have knowledge of the matter said that these fees are only a quarter of the typical rate for large stock sales.
Joe Phillippi, principal of AutoTrends, a consulting firm in Short Hills, New Jersey, calls this practice as "hardball." He said that he finds it unusual that they "want another pound of flesh" after asking for really low fees.
No comments about this report have been heard from JPMorgan, Morgan Stanley, or GM. The two-page document states in particular that GM asked banks to talk about ideas on how it can use the IPO to "reposition GM and its vehicles within the investment community."
In addition, GM requested the firm's "willingness to reinvest any portion of any underwriting fees into the purchase of GM vehicles for your employees and/or company use." [via autonews]